The issue is that the US has once again run out of money and need to borrow more to fund the basic functions of government such as pay wages and social security payments.
How does the money supply keep increasing to make "borrowing" possible for our government? Who does it borrow from, and where do they get their money to loan if the government's spending is the sole source of our money supply? I need to find this pile of US dollars that is hidden somewhere. Or, something else is going on. The maths don't add up.
The truth is that Treasury bonds and tax collections
aren't "funding mechanisms" for any government that uses a sovereign fiat currency. The currency must exist before either can take place, so they can't be. Also, with such a currency there is no limit to the amount the issuer can spend unless an arbitrary rule/law exists to artificially create such limits.
But it raises a far bigger question long-term. Just how long can the US continue to fund huge budget deficits and borrow trillions of dollars before it becomes a problem?
If borrowing can't "fund" government spending, then what is it really for and why do it? Why not simply create money as needed to "fund" government directly into the private sector?
The monopoly issuer of the US dollar never "needs" our money to spend. It does, however, need us to need its money, which is the primary purpose of taxing. Once the need for the government's unit of measure is established it then needs to control the amount of it in the private sector or it would soon become worthless.
One way it does that is by offering Treasury instruments that remove currency temporarily and pays a small interest dividend upon maturity. This limits the currency in the private sector and satisfies the desire of the people to net save.
The "debt" is never a problem with a fiat currency. An issuing government can never run out of the currency and can "afford" whatever is available and priced in that currency. It will never be repaid, and repayment shouldn't ever be the goal, as making it so only extracts existing money in the private sector and reduces our ability to retire private sector debt.
US national debt is now approaching $30 trillion. The debt will be much higher in the years ahead.
This is not sustainable.
The dollars are never a factor in sustainability. It is the real resources and labor the dollars are intended to deploy that are. As long as those resources potentially exist the market will keep the price stable, although we may occasionally have to accept some higher prices because of extranious influences, such as a global pandemic causing supply chain issues.
Modern money theory says the US can borrow and print more money to inflate their economy to the point that debt becomes comparatively smaller and more manageable. Great in theory but there are always unintended consequences.
Your grasp of MMT, and econ in general, is flawed. I'd suggest you read a bit more before making unfounded assumptions about what it says. MMT clearly states that the upper limit to money creation is always inflation.
It also states that the "debt" is the accumulation of monetary assets left in the private sector as a store of value from its commerce and not a mortgage on future productivity. It isn't about inflating the debt at all, but redefining the debt to reflect reality.
The main reason the US can take on so much debt is because interest rates are basically 0%. If interest rates go up it’s a different story. But even then, debt in the form of govt bonds is typically 10 years to maturity so it will still take time to impact the costs of borrowing for much of their debt.
Interest rates are not a function of a "market' in the private sector. They are set by the Fed to enable its monetary policy. I'm not even sure what the rest of this means, so it's difficult to respond to it. It certainlly has no basis in reality.
Bonds mature every day and are simply converted back into reserves when they do. They are always a part of the debt/money supply until they are extinguished as tax payments, so ten years or one hundred years make no difference.
It might not matter for many years, but it will one day.
This is the doom and gloom language of the conservative that tells us that the richest nation can't afford to fund its own people and maintain its infrastructure. It is the language that defines failure masked as "caution" that incentivizes austerity and misery.
If there is misery in this nation that can be mitigated with spending it is only because someone profits from it, not because we can't afford to mitigate it. America needs to ignore the messengers of the oligarchy and their puppet politicians and media and make their government work for them again.
